Monetary theory predicts that high inflation rates may imply the need for bigger banknotes. At the same time, monetary authorities may fear that introducing higher-valued banknotes leads to inflation. This paper concerns an analysis of 40 years of data on inflation and denominations for 59 countries, and it reports that causality runs from inflation to banknotes and not the other way around.

Additional Metadata
Keywords bank notes, econometrics, economic aspects, empirical research, inflation (finance), monetary theory, price levels
Persistent URL hdl.handle.net/1765/13394
Citation
Franses, Ph.H.B.F.. (2006). Empirical Causality between Bigger Banknotes and Inflation. Applied Economics Letters, 751–752. Retrieved from http://hdl.handle.net/1765/13394